Autumn Budget: Housebuilders drop amid muted reaction in FTSE, gilts and sterling

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Housebuilders were some of the few real Autumn Budget movers within the FTSE 100 as markets delivered a muted response.

The FTSE 100 was trading at 7,448 when Chancellor Philip Hammond stood up to start his budget speech, but was almost unchanged when he finished an hour later. The benchmark UK 10-year Government bond and GBP against the euro were both largely unchanged.

Sterling rose against the US dollar towards $1.3275.

However, Barratt, Persimmon, Taylor Wimpey and Berkeley dropped between 1 per cent and 3 per cent, with Liontrust UK equity manager Stephen Bailey describing it as a buying opportunity.

“Hammond has promised £44bn in investment and loans over five years and scrapped stamp duty on property values under £300k for first-time buyers.

“This will benefit listed housebuilders which have significant non-prime exposures as well as building materials stocks such as Forterra, Ibstock and Marshalls.”

AJ Bell investment director puts the drops down to Hammond’s announcement of a review into land banking.

“The real secret sauce of being a profitable house builder is to buy land cheaply,” Mould says. “Even if all builders deny that they budget for any land or price inflation in their business plans there can be no denying that they get a margin boost if the value of the asset then rises over time.”

He notes Foxtons and Countywide were up, possibly amid hopes for fresh activity amongst first-time buyers as Hammond removes stamp duty for first-home buyers.

Mould says bond investors would have welcomed the Chancellor’s commitment to reduce the annual deficit and rein in the aggregate deficit.

Pimco head of sterling portfolios Mike Amey says there was little in the budget to change the medium term outlook for gradually higher interest rates, while Brexit remains the greatest economic uncertainty.

“Pimco continues to see the scope for the Bank of England to hike interest rates at a slightly faster pace than the implied path of two additional increases by 2020,” Amey says.